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Bolsonaro to discuss Brazil OPEC membership next week - Energy Minister

President Jair Bolsonaro and Mines and Energy Minister to discuss OPEC

- Economy Minister says Brazil doesn't support cartels, price controls
- OPEC talks surprise industry, could affect subsalt auction interest

By Jeff Ficks / Bloomberg

Petroleumworld 11 05 2019

Brazil's government will hold meetings next week to discuss the country's potential entrance into OPEC after President Jair Bolsonaro indicated Latin America's largest oil and natural gas producer had once again received overtures from the cartel, Mines and Energy Minister Bento Albuquerque said Friday.

"We're going to meet next week, and I think during this opportunity he'll tell us about the proposal he received in Saudi Arabia and it will be analyzed by the Mines and Energy team as well as the Economy Ministry," Albuquerque said.

Bolsonaro, who has a history of making off-the-cuff comments in public appearances that have caused rifts with congressional leaders and members of his administration, surprised local oil industry officials with the disclosure Wednesday during the Future Investment Initiative Conference in Riyadh.

"I personally would like Brazil to be a member of OPEC, the potential is there," Bolsonaro said. "We have enough reserves, they're actually larger than some current members have."

Brazil's possible inclusion in OPEC generated concerns about the impact future production limits or quotas could have on interest in upcoming bid rounds, with two important sales of subsalt acreage scheduled for next week. Brazil's National Petroleum Agency, or ANP, will sell rights to develop 5.2 billion-15.1 billion barrels of oil equivalent discovered by state-led oil company Petrobras in the transfer-of-rights areas on Wednesday, with the country's sixth subsalt production-sharing auction that includes five additional exploration blocks set for Thursday.

Brazil also has annual bid rounds and subsalt production-sharing auctions scheduled for 2020 and 2021.

The transfer-of-rights auction is considered the world's biggest-ever licensing sale, with the oil already discovered and one of the fields, Buzios, already in production. The sale is expected to raise more than $25 billion in signing bonuses, with oil companies winning development rights based on how much profit oil is guaranteed to the government.

Industry sources said government officials were already working to alleviate any concerns by reaching out to oil companies registered for the two sales. Brazil has a long history of honoring contracts and current concession and production-sharing contracts, including those approved for the two bid rounds, don't include any clauses that could limit output, the sources noted.

Bolsonaro also appeared to pull back slightly from his declaration in Saudi Arabia while also confirming upcoming talks with the Mines and Energy Ministry on Friday.

"An invitation was made on the part of a Middle Eastern country for us to join OPEC," Bolsonaro said in Brasilia. "I spoke quickly with the Mines and Energy Minister, who told me that there were pros and cons and that a decision shouldn't be made quickly. We should talk next week. It was only an invitation."

Brazil, which has long-term commercial ties to countries in the Mideast, was previously invited to join OPEC by Iran during the administration of former President Luiz Inacio Lula da Silva. Talks never advanced beyond the preliminary stages. Brazil, however, has participated in open OPEC production discussions, including sending a delegation to attend talks in Algiers in August 2016.

Economy Minister Paulo Guedes, a key architect of the Bolsonaro administration's plan to open Brazil's economy, said Friday that an invitation to join OPEC was "inevitable," given the country's likely ascension to become one of the world's top five oil producers over the next decade. The ANP estimates that Brazil will produce 5.5 million b/d by 2030 as recent subsalt discoveries come onstream. While membership in OPEC could make geopolitical sense, Guedes noted that participation in cartels and artificial price controls were anathema to the country's core principles.

"We believe in democracy, market economies, cooperation and global integration," Guedes said.

Guedes noted that Brazil and the US produce about two-thirds of the world's soybeans, but had never joined forces to control global food prices.

"Our concepts as a part of Western, liberal democracies would never be to use cartels or strengthen cartels as a way to corner democracies that depend on oil," he said.


Story by Jeff Fick from SPGlobal Platts. 11 01 2019


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